You will need to edit the php.ini file and restart the web server after you've made the change. Whether you can do this or not, depends on whether you have write permission to edit the file. In a Linux environment, the file is typically here:

/etc/httpd/php.ini

However, you will probably need "root" access in order to edit the file and reboot apache (I'm assuming that's what you're using).

If your application is hosted, discuss it with your host webmaster. If you're sharing the host with others, keep in mind that they probably won't want to make the change just for you.

Having the same "The uploaded file exceeds the upload_max_filesize directive in php.ini"-problem and from what I read here, it seems that I have to contact my webhost, as I can't see a php.ini anywhere on my server.

But the strange thing is, before I upgraded to WordPress 2.0, I had no problem uploading bigger files - and therefore it seems not so logical to me, that I now would need to change a file I never had access to previously...

I'm having the same problem and am trying to fix it with an .htaccess file. pizdin_dim said that the php.ini file would have to be updated, thoiugh. can I take it to mean that cahnging the .htaccess won't work?

Here's 2 ways to fix this problem:
*MAKE SURE YOU BACK UP FIRST JUST IN CASE !!!

#1 Change your php.ini file if you have access to it. If your running a testing server on your own computer you can access it. If your hosting your site with someone like dreamhost you will not have access to it unless your using a dedicated server. Most are shared servers.

To access the php.ini file while using your server on your computer or dedicated server you first need to find which .ini your database is using, so create a .php file and write this in between the <body> tags:

<?php
phpinfo();
?>

Save the file and make sure your server is running. Open the file you just saved in your browser. Now look for: "Configuration File (php.ini) Path"
Get that location cause that's the active php.ini file.

Goto that location and open that file. Note: .ini file are hidden files so you will need an editor that allows you to see hidden files... Dreamweaver and BBEdit are 2 examples.

Change these lines to the app. config you like:
These are my settings...

Save the php.ini file and upload it back to the same directory. Restart your server and that's it.

#2 This is the easier way to fix the problem. All you have to do is overwrite those configurations by adding the following into your .htaccess file. The #Change upload limits is just a comment. You can put these lines before or after any other script in you .htaccess file. Save it and upload. That's it! Hope this helps!